Technical Market Report

By: Mike Burk | Sat, Nov 20, 2004
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The good news is:
 • After Monday and Tuesday we enter one of the seasonally strongest periods of the year.
 • The up move of the past three weeks was very broad suggesting more to come.
 • The recent highs were confirmed by nearly every short and intermediate term indicator suggesting more to come.

The sell off that began last week was overdue and like the sell off in late September does not have much time. The chart below shows the NASDAQ composite in red and an indicator constructed by subtracting momentum of NASDAQ new lows from momentum of new highs in dark purple. Vertical dashed lines are drawn at the first trading day of each month.

The indicator is short term and nearly binary in its representation of market strength moving sharply upward or downward at turning points.

The current period looks very much like last September when a little weakness developed after an extended upward move. In September there was not much time for the downward move to be completed because of seasonally strong period at the end of September. Next week beginning Wednesday we also enter a seasonally strong period so this down move has little time for completion.

Next week will be influenced by some very strong seasonal patterns, Thanksgiving week usually begins weak and ends strong. Next week is also the week after options expiration which also usually begins weak and ends strong.

Report for 3 days before Thanksgiving and 1 day after.
Day1 = the day after
The number following the % change represents the day of the week:
1=Monday, 5=Friday etc.
The number following the year is the year of the presidential cycle.

R2K = Russell 2000
Year Day4 Day3 Day2 Day1 Totals
1988-4 -0.65% 1 -0.06% 2 0.39% 3 -0.19% 5 -0.51%
1989-1 -0.58% 1 -0.40% 2 0.34% 3 0.43% 5 -0.21%
1990-2 0.38% 1 -0.47% 2 -0.08% 3 0.18% 5 0.00%
1991-3 -0.70% 1 -0.31% 2 -0.03% 3 0.48% 5 -0.56%
1992-4 -0.02% 1 0.51% 2 0.53% 3 0.27% 5 1.30%
1993-1 -1.65% 1 0.51% 2 0.69% 3 0.13% 5 -0.32%
1994-2 -0.72% 1 -1.84% 2 -0.68% 3 0.59% 5 -2.65%
1995-3 -0.53% 1 -0.36% 2 0.04% 3 0.34% 5 -0.52%
1996-4 0.68% 1 -0.26% 2 0.37% 3 0.41% 5 1.19%
1997-1 -1.66% 1 -0.22% 2 0.29% 3 0.41% 5 -1.17%
1998-2 0.98% 1 -0.39% 2 0.69% 3 0.69% 5 1.97%
1999-3 -0.11% 1 -1.37% 2 0.33% 3 0.66% 5 -0.49%
2000-4 -2.56% 1 -0.73% 2 -1.90% 3 3.05% 5 -2.15%
2001-1 1.42% 1 -0.83% 2 -0.35% 3 1.35% 5 1.59%
2002-2 1.21% 1 -1.61% 2 2.99% 3 -0.95% 5 1.65%
2003-3 2.58% 1 0.68% 2 0.39% 3 0.22% 5 3.87%
Averages -0.12% -0.45% 0.25% 0.51% 0.37%
Winners 38% 19% 69% 88% 44%
 
Presidential year 4
Year Day4 Day3 Day2 Day1 Totals
1988-4 -0.65% 1 -0.06% 2 0.39% 3 -0.19% 5 -0.51%
1992-4 -0.02% 1 0.51% 2 0.53% 3 0.27% 5 1.30%
1996-4 0.68% 1 -0.26% 2 0.37% 3 0.41% 5 1.19%
2000-4 -2.56% 1 -0.73% 2 -1.90% 3 3.05% 5 -2.15%
Averages -0.64% -0.13% -0.16% 0.88% -0.04%
Winners 25% 25% 75% 75% 50%
 
SPX = S&P500
Year Day4 Day3 Day2 Day1 Totals
1988-4 -0.09% 1 0.37% 2 0.67% 3 -0.66% 5 0.29%
1989-1 -0.66% 1 0.07% 2 0.68% 3 0.60% 5 0.69%
1990-2 0.70% 1 -1.26% 2 0.23% 3 -0.29% 5 -0.63%
1991-3 -0.21% 1 0.70% 2 -0.37% 3 -0.35% 5 -0.24%
1992-4 -0.36% 1 0.58% 2 0.37% 3 0.23% 5 0.82%
1993-1 -0.75% 1 0.41% 2 0.29% 3 0.15% 5 0.10%
1994-2 -0.69% 1 -1.79% 2 -0.04% 3 0.52% 5 -1.99%
1995-3 -0.54% 1 0.57% 2 -0.31% 3 0.26% 5 -0.01%
1996-4 1.11% 1 -0.14% 2 -0.13% 3 0.27% 5 1.11%
1997-1 -1.70% 1 0.44% 2 0.09% 3 0.40% 5 -0.79%
1998-2 2.12% 1 -0.44% 2 0.33% 3 0.46% 5 2.47%
1999-3 -0.07% 1 -1.15% 2 0.89% 3 -0.03% 5 -0.37%
2000-4 -1.84% 1 0.35% 2 -1.85% 3 1.47% 5 -1.87%
2001-1 1.09% 1 -0.73% 2 -0.49% 3 1.17% 5 1.04%
2002-2 0.25% 1 -2.10% 2 2.80% 3 -0.27% 5 0.68%
2003-3 1.62% 1 0.17% 2 0.43% 3 -0.02% 5 2.20%
Averages 0.00% -0.25% 0.22% 0.24% 0.44%
Winners 38% 56% 63% 63% 56%
 
Presidential year 4
Year Day4 Day3 Day2 Day1 Totals
1988-4 -0.09% 1 0.37% 2 0.67% 3 -0.66% 5 0.29%
1992-4 -0.36% 1 0.58% 2 0.37% 3 0.23% 5 0.82%
1996-4 1.11% 1 -0.14% 2 -0.13% 3 0.27% 5 1.11%
2000-4 -1.84% 1 0.35% 2 -1.85% 3 1.47% 5 -1.87%
Averages -0.29% 0.29% -0.23% 0.33% 0.09%
Winners 25% 75% 50% 75% 75%

Report for the week after witching Friday in Nov.
Witching is futures and options expiration the 3rd Friday of the month.
The number following the year is the position in the presidential cycle.
Daily returns for the 5 trading days after Witching.

R2K
Year Mon Tue Wed Thur Fri Totals
1988-4 -0.65% -0.06% 0.39% -0.19% -0.04% -0.55%
1989-1 -0.58% -0.40% 0.34% 0.43% 0.18% -0.03%
1990-2 0.38% -0.47% -0.08% 0.18% -0.22% -0.22%
1991-3 -0.04% -2.26% 0.33% 0.34% -0.77% -2.39%
1992-4 -0.02% 0.51% 0.53% 0.27% 0.62% 1.91%
1993-1 -1.65% 0.51% 0.69% 0.13% 0.00% -0.32%
1994-2 -0.72% -1.84% -0.68% 0.59% 0.27% -2.37%
1995-3 -0.53% -0.36% 0.04% 0.34% 0.32% -0.20%
1996-4 -0.17% 0.29% 0.17% -0.10% 0.79% 0.98%
1997-1 -1.66% -0.22% 0.29% 0.41% 0.99% -0.18%
1998-2 0.98% -0.39% 0.69% 0.69% -1.08% 0.89%
1999-3 -0.11% -1.37% 0.33% 0.66% -0.43% -0.93%
2000-4 -2.56% -0.73% -1.90% 3.05% -0.04% -2.19%
2001-1 1.42% -0.83% -0.35% 1.35% 0.61% 2.20%
2002-2 -0.87% -0.79% 2.38% 2.34% 0.58% 3.65%
2003-3 2.58% 0.68% 0.39% 0.22% 1.48% 5.35%
Avg -0.26% -0.48% 0.22% 0.67% 0.20% 0.35%
Win% 25% 25% 75% 88% 56% 38%
 
Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1988-4 -0.65% -0.06% 0.39% -0.19% -0.04% -0.55%
1992-4 -0.02% 0.51% 0.53% 0.27% 0.62% 1.91%
1996-4 -0.17% 0.29% 0.17% -0.10% 0.79% 0.98%
2000-4 -2.56% -0.73% -1.90% 3.05% -0.04% -2.19%
Avg -0.85% 0.00% -0.20% 0.76% 0.33% 0.04%
Win% 00% 50% 75% 50% 50% 50%
 
SPX
Year Mon Tue Wed Thur Fri Totals
1988-4 -0.09% 0.37% 0.67% -0.66% 0.53% 0.82%
1989-1 -0.66% 0.07% 0.68% 0.60% 0.48% 1.17%
1990-2 0.70% -1.26% 0.23% -0.29% 0.45% -0.18%
1991-3 0.68% -1.51% -0.23% 0.40% -1.03% -1.69%
1992-4 -0.36% 0.58% 0.37% 0.23% 0.28% 1.10%
1993-1 -0.75% 0.41% 0.29% 0.15% -0.25% -0.15%
1994-2 -0.69% -1.79% -0.04% 0.52% 0.41% -1.58%
1995-3 -0.54% 0.57% -0.31% 0.26% 0.23% 0.21%
1996-4 -0.08% 0.70% 0.24% -0.16% 0.81% 1.50%
1997-1 -1.70% 0.44% 0.09% 0.40% 2.03% 1.24%
1998-2 2.12% -0.44% 0.33% 0.46% -2.41% 0.06%
1999-3 -0.07% -1.15% 0.89% -0.03% -0.62% -0.99%
2000-4 -1.84% 0.35% -1.85% 1.47% 0.54% -1.33%
2001-1 1.09% -0.73% -0.49% 1.17% 0.62% 1.65%
2002-2 -1.04% -0.40% 1.94% 2.15% -0.34% 2.30%
2003-3 1.62% 0.17% 0.43% -0.02% 1.13% 3.33%
Avg -0.10% -0.23% 0.20% 0.42% 0.18% 0.47%
Win% 31% 56% 69% 69% 69% 63%
 
Presidential year 4
Year Mon Tue Wed Thur Fri Totals
1988-4 -0.09% 0.37% 0.67% -0.66% 0.53% 0.82%
1992-4 -0.36% 0.58% 0.37% 0.23% 0.28% 1.10%
1996-4 -0.08% 0.70% 0.24% -0.16% 0.81% 1.50%
2000-4 -1.84% 0.35% -1.85% 1.47% 0.54% -1.33%
Avg -0.59% 0.50% -0.14% 0.22% 0.54% 0.52%
Win% 00% 100% 75% 50% 100% 75%

Next week should have a turning point in the middle, Monday and Tuesday weak while Wednesday and Friday should be strong. The 4th year of the presidential cycle has been a little weaker than the average of all years. I think the completion of the down move Monday and Tuesday is likely to do more damage than the up move that should begin on Wednesday will help.

I expect the major indices to be lower on Friday November 26 than they were on Friday November 19.


 

Author: Mike Burk

Mike Burk

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented herein are believed to be reliable but we cannot attest to their accuracy. Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com). Historical data is from Barron's and ISI price books. The views expressed are provided for information purposes only and should not be construed in any way as investment advice. Furthermore, the opinions expressed may change without notice.

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